Ericsson’s top management team is trying to revive and control the revenue decline that continued in the last three quarters.
Ericsson’s revenue has peaked in Q4 2015 and fell to low levels as compared with Q4 and Q3 of 2015. Operating income and operating margin of Ericsson are also experiencing a similar phase of decline.
The decline in Ericsson revenue is not in line with the telecom Capex growth anticipated this year. Industry analysts are speculating that telecom Capex will grow marginally in 2016 thanks to 4G and 3G – driven mobile Internet deployments.
Ericsson failed to capitalize on acquisitions and enhance market potential to take on main rival Nokia. The Finnish technology major acquired Alcatel-Lucent to enhance the market opportunity. Nokia is also buying small companies to increase focus on innovative solutions.
Ericsson said its third quarter revenue fell 14 percent to SEK 51.1 billion – primarily due to 19 percent drop in sales in networks business.
Ericsson generated SEK 23.3 billion (–19 percent) from networks business, SEK 24.8 billion (–8 percent) from global services and SEK 2.9 billion (–11 percent) revenue.
Ericsson said the negative industry trends from the first half of 2016 have further accelerated. The main reason is weaker demand for mobile broadband, especially in markets with a weak macro-economic environment.
Ericsson said the current industry trends indicate a somewhat weaker than normal seasonal sales growth between the third and fourth quarters. In addition, a renewed managed services contract in North America, with reduced scope, will impact sales negatively. Current business mix of coverage and capacity sales in mobile broadband is anticipated to prevail in the short term.
Jan Frykhammar, president and CEO of Ericsson, said: “The negative industry trends from the first half of 2016 have further accelerated, impacting Q3 sales, primarily relating to mobile broadband. The decline, in both mobile broadband coverage and capacity sales, was particularly strong in markets with a weak macro-economic environment. In addition, capacity sales in Europe were lower than a year ago. Gross margin declined following lower mobile broadband capacity sales, a higher share of services sales and lower sales in networks.”
Ericsson was hit hard by poor performance in all telecom markets. Ericsson India’s revenue fell 28 percent in Q3.
ALSO READ: Ericsson India revenue dips 28% to $292 mn in Q3
Ericsson’s revenue of North America was SEK 13.2 billion, showing a drop of 8 percent. Ericsson’s Latin America revenue fell 22 percent to SEK 4.4 billion. Revenue from Northern Europe and Central Asia was SEK 2.0 billion, falling 19 percent. Western and Central Europe generated SEK 3.6 billion revenue with 21 percent drop in growth.
Ericsson generated SEK 4.5 billion (–17 percent) from Mediterranean, SEK 4.3 billion (-25 percent) from Middle East, SEK 2.0 billion (-25 percent) from Sub-Saharan Africa, SEK 2.6 billion (-28%) from India, SEK 6.1 billion (-4 percent) from North East Asia, SEK 5.1 billion (+6 percent) from South East Asia and Oceania and SEK 3.3 billion (-8 percent) from other areas.
Baburajan K
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